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Question
Calculate Working Capital Turnover Ratio from the following information:
| ₹ | |
| Inventory | 3,10,000 |
| Trade Receivables | 1,30,000 |
| Cash | 20,000 |
| Trade Payables | 60,000 |
| Cost of Revenue from Operations | 30,40,000 |
| G.P. | 24% of Revenue from Operations |
Numerical
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Solution
Let the Revenue from Operations be x.
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
x = ₹ 30,40,000 + `24/100`x
x − `24/100`x = ₹ 30,40,000
`76/100` x = ₹ 30,40,000
x = `(₹ 30,40,000 xx 100)/76`
x (Revenue from Operations) = ₹ 40,00,000
Current Assets = Inventory + Trade Receivables + Cash
= ₹ 3,10,000 + ₹ 1,30,000 + ₹ 20,000
= ₹ 4,60,000
Current Liabilities = Trade Payables = ₹ 60,000
Working Capital = Current Assets − Current Liabilities
Working Capital = ₹ 4,60,000 − ₹ 60,000
= ₹ 4,00,000
Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`
= `(₹ 40,00,000)/(₹ 4,00,000)`
= 10 Times
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